TMI Blog1982 (9) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... e income to be assessed from house property in the assessment year 1971-72 by deducting two amounts, (1) Rs. 16,130.52, being the urban land tax paid for the period July 1, 1963, to June 30, 1970, and (2) Rs. 1,728.27, being the urban land tax paid for the period July 1, 1970, to June 30, 1971. The ITO, however, felt that in the computation of the income from house property for the assessment year 1971-72, only the urban land tax paid in relation to that assessment year could be deducted. In this view he recomputed the assessee's income and arrived at the share of the assessee's income from house property at Rs. 3,973. Aggrieved by the order of the ITO, the assessee filed an appeal before the AAC who, however, concurred with the ITO and held that for the computation of income from house property the deduction under s. 24 can be only the tax relatable to the assessment year and that any extra amount paid in respect of such taxes for the previous year is not allowable even though such arrears were paid during the previous year. The assessee took the matter in appeal to the Income-tax Appellate Tribunal. The Tribunal has held that the amount of Rs. 16,130.52 paid during the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal has not been disputed before us. Therefore, we have to proceed on the basis of the order of the Tribunal that the rental from the cinema theatre constructed by the assessee jointly with others should be taken to be income from house property and the rents received from the Andhra Scientific Company in respect of the building that was taken on lease by the assessee along with the land will have to be taken as income from other sources. According to the Tribunal since urban land tax is payable in respect of the land and not in respect of the property which is the theatre building, in computing the rental income from the theatre building the urban land tax is not deductible and only a deduction relatable to the theatre building alone can be allowed and, therefore, the income from that property will have to be computed as income from the house property without giving any allowance for the urban land tax. However, the rental income from Andhra Scientific. Company building, let on rent, of which the assessee is not the owner but only a lessee, has to be classified as income from other sources and is to be computed in accordance with s. 57 of the I.T. Act, 1961. In the computat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as by the AAC but upheld by the Tribunal. When the matter was taken to this court, this court took the view that having regard to the scheme of the Tamil Nadu Urban Land Tax Act, which levies urban-land tax, it is clear that there is no question of accrual of the liability every year, that the amount became payable only as and when it is demanded, that in so far as s. 24(1)(vii) used the word " paid " and not " payable " or " chargeable ", the emphasis should be placed On the actual payment and not payability and that, therefore, the assessee was eligible for deduction of the urban land tax paid during the year though the amount related to some earlier years. The same view has also been taken by this court in CIT v. Woodlands Hotel [1981] 128 ITR 603. The only question then remains to be considered is whether the payment of Rs. 16,130.52 can be claimed as an admissible deduction for arriving at the income under the head " Other sources " for the year 1971-72, as has been held by the Tribunal. The contention of the Revenue on this aspect of the case is that the assessee has got two capacities, one as a lessee and the other as a landlord and that the amounts should be ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asing it he earns income. As a lessee he had undertaken to pay the urban land tax payable on the land in respect of which the lessor is principally liable. Therefore, the amount of urban land tax actually paid should be taken to be an amount paid in addition to the lease amount by the lessee to the landlord. Though the amount is paid by the assessee as a lessee to the Government, he is discharging the liability of the owner of the land in pursuance of a lease agreement and not as owner of the land. The liability to pay urban land tax on behalf of the lessor, undertaken by the lessee, is a contractual liability entered into as part of the lease arrangement which has been entered into between the lessor and the lessee for the purpose of making or earning an income. Therefore, the urban land tax which the assessee has undertaken to pay to the Government on behalf of the lessor should be taken to be a payment in addition to the lease amount. It cannot be disputed that the lease amount paid by the lessee to the lessor will be a deductible expenditure in the computation of, income from other sources. If the lease amount could be deducted under s. 57(iii), we do not see why the urban land ..... X X X X Extracts X X X X X X X X Extracts X X X X
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