TMI Blog1981 (11) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... arly chargeable to urban land tax. The liability started from July 1, 1963, onwards. For a period of 7 years or so it amounted to Rs. 64,222. In the account year ended March 31, 1971, relevant to the assessment year 1971-72, the assessee-company claimed to deduct the entire amount of Rs. 64,222 as an admissible deduction in the computation of its business profit. The deduction claimed was, however, refused by the ITO on the ground that the claim related to earlier years. The assessee went in appeal before the AAC and reiterated its claim for deduction. At that stage, however, the assessee limited its claim to the total sum of Rs. 48,762. The AAC took the view that the assessee was entitled to a deduction only in respect of urban land tax pertaining to the year ended March 31, 1971. He disallowed the rest of the liability claimed, which amounted to Rs. 41,330. The assessee filed a further appeal to the Tribunal claiming the balance of the amount. The Tribunal followed an earlier decision of theirs and allowed the claim of the assessee in full. They held that the method of accounting followed by the assessee was the mercantile method and, therefore, the assessee was entitled to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as five half years, spanning the period October 1, 1968, to March 31, 1971. The ITO took the view that property tax for the two half years alone included in the account year ended March 31, 1971, was eligible for deduction in this assessment. The two half years in question were April 1, 1970, to September 30, 1970, and October 1, 1970, to March 31, 1971. The tax for the two half-years amounted to Rs. 6,715.89. Allowing this sum as a deduction, the ITO disallowed the balance of Rs. 10,074. The disallowance covered the earlier three half years, October 1, 1968, to March 31, 1969, which related to the year ended March 31, 1969, relevant to the income-tax assessment year 1969-70, and two other half years relevant to the income-tax assessment year 1970-71, namely, April 1, 1969, to September 30, 1969, and October 1, 1969, to March 31, 1970. The assessee appealed against the disallowance of Rs. 10,074. The Tribunal, before whom the matter was ultimately taken up in appeal, accepted the contentions of the assessee and held that irrespective of the period to which the municipal property tax related, the assessee was entitled to a deduction during the account year in which the property tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s due or when it is recoverable, is quite another, let alone the actual date of payment. In the present case, the contention of the assessee, which the Tribunal accepted, was that notwithstanding that the municipal property tax accrued every half year in terms of s. 104 of the Act, yet the assessee would be justified in claiming a deduction for that tax as an outgoing or as a charge against profits, without any regard for its time of accrual. We cannot accept this submission as well-founded in view of the clear terms of s. 104 of the Act. This section fixes the liability not only for the purpose of that Act, but by the same token, it does so also for purposes of determining the time of accrual in a mercantile system of accounting. It is easy to see that s. 104 of the Act has been couched in terms in which it might be said that, at the end of the half year concerned, the accrual of liability becomes automatic, as it were. According to the scheme of the municipal property tax, once the annual value of the property is determined, until it is next revised, either under a general revaluation or under any special revaluation, the property tax bearing on that valuation also stands quantif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessarily make a provision for urban land tax as and when it accrues due. If the Urban Land Tax Act relates the tax to particular year, the, assessee cannot have a choice of not making a provision for that liability, but allow it to accumulate and then claim a deduction in some future year. Mr. Srinivasamoorthy submitted that in case of any fiscal liability, there may be more than one stage at which it might be said to accrue. Learned counsel said, there is, firstly, a charge or levy, then comes the assessment, and last comes the process of recovery. According to learned counsel, it is entirely within the choice of the assessee to make a provision for tax liability at any of these successive stages, and whether he does make a provision or not, it has got to be allowed without question at any of these stages. Learned counsel referred to the views expressed on these lines by Kanga and Palkhivala, 7th Edn., at p. 870 of vol. I of their work on income-tax. The learned authors express the view that, under the mercantile system of accounting, liability under a fiscal statute should be allowed in the year in which the relevant taxable event takes place. For this proposition, the authors ..... X X X X Extracts X X X X X X X X Extracts X X X X
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