TMI Blog1950 (5) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is an investment company deriving its income from properties in the City of Bombay. For the assessment year 1940-41 the net income of the assessee under the head " property " was computed by the Income-tax Officer in the sum of Rs. 6,21,764 after deducting from gross rents certain payments. The company had paid during the relevant year Rs. 1,22,675 as municipal property tax, and Rs. 32,760 as urban property tax. Deduction of these two sums was claimed under the provisions of Section 9 of the Act. Out of the first item a deduction in the sum of Rs. 48,572 was allowed on the ground that this item represented tenants' burdens paid by the assessee, otherwise the claim was disallowed. The appeals of the assessee to the Appellate Assistant Commissioner and to the Income-tax Appellate Tribunal were unsuccessful. The Tribunal, however, agreed to refer two questions of law to the High Court of Judicature at Bombay, namely- (1) Whether the municipal taxes paid by the applicant-company are an allowable deduction under the provisions of Section 9(1)(iv) of the Indian Income-tax Act ; (2) Whether the urban immoveable property taxes paid by the applicant-company are an allowable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here could only mean a charge created for a capital sum, i.e., a charge to secure the discharge of a liability of a capital nature. In 1933 the Privy Council decided the case of Bejoy Singh Dudhuria v. Commissioner of Income-tax, Calcutta. It was not an assessment under Section 9 but an assessment on the general income of an assessee who was liable to pay maintenance for his step mother which had been charged on all his assets by a decree of court. It was not a liability voluntarily incurred by him but one cast on him by law. The Privy Council held that the amount paid by him in discharge of that liability formed no part of his real income and so should not be included in his assessment. Though the decision proceeded on the principle that the outgoings were not part of the assessee's income at all, the framers of the amending Act of 1939 wanted, apparently, to extend the principle, so far as the assessment of property was concerned, even to cases where obligatory payments had to be made out of the assessee's income from the property charged with such payments, and the second sub-clause, namely, " where the property is subject to an annual charge not being a capital charge, the amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge of an annual liability, then, capital charge means a charge to secure the discharge of a liability of a capital nature. We think this construction is a natural construction of the section and is right. The determination of the point whether the taxes in dispute fall within the ambit of the phrase " annual charge not being a capital charge " depends on the provisions of the statutes under which they are levied. Section 143 of the City of Bombay Municipal Act, 1888, authorises the levy of a general tax on all buildings and lands in the city. The primary responsibility to pay this property tax is on the lessor (vide Section 146 of the Act). In order to assess the tax provision has been made for the determination of the annual rateable value of the building in Section 154. Section 166 provides for the maintenance of an assessment book in which entries have to be made every official year of all buildings in the city, their rateable value, the names of persons primarily liable for payment of the property tax on such buildings and of the amount for which each building has been assessed. Section 167 lays down that the assessment book need not be prepared every official year but publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lthough it may be that they are collected at intervals of six months for the sake of convenience, that the income-tax itself is assessed on an annual basis, that in allowing deductions all payments made or all liabilities incurred during the previous year of assessment should be allowed and that the taxes in question fell clearly with the language of Section 9(1)(iv). The learned Attorney-General, on the other hand, argued that although the taxes are assessed for the year the liability to pay them arises at the beginning of each half year and unless a notice of demand is issued and a bill presented there is no liability to pay them and that till then no charge under Section 212 of the Act could possibly arise and that the liability to pay being half yearly in advance, the charge is not an annual charge. It was also suggested that the taxes were a capital charge in the sense of the property being security for the payment. We are satisfied that the contentions raised by the learned Attorney-General are not sound. It is apparent from the whole tenor of the two Bombay Acts that the taxes are in the nature of an annual levy on the property and are assessed on the annual value of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermining the exact meaning of the words used by the statute it seems to us it was not possible to arrive at the conclusion that the taxes were not within the ambit of the clause. It is elementary that the primary duty of a court is to give effect to the intention of the legislature as expressed in the words used by it and no outside consideration can be called in aid to find that intention. Again reference to clause (v) of the section is not very helpful because land revenue is a charge of a paramount nature on all buildings and lands and that being so, a deduction in respect of the amount was mentioned in express terms. Municipal taxes, on the other hand, do not stand on the same footing as land revenue. The law as to them varies from province to province and they may not be necessarily a charge on property in all cases. The legislature seems to have thought that so far as municipal taxes on property are concerned, if they fall within the ambit of clause (iv), deduction will be claimable in respect of them but not otherwise. The deductions allowed in Section 10 under the head " Income from business " proceed on a different footing and a construction of Section 9 with the aid of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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