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TMI Blog1985 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... s increase in the rent of the house property from 1-4-1980 and, therefore, he would be required to pay municipal taxes on the enhanced rent, which on calculation came to Rs. 23,489. Contention of the assessee before the ITO was that municipal tax was though not levied on the enhanced rent but it was bound to be levied at any time in future and he would be under obligation to pay the same. It was also his contention that arrears of the enhanced tax would not be allowable to him as deduction from the gross rent in future and, therefore, he claimed the same on fair estimate on accrual basis. The ITO turned down such contention of the assessee on the reasoning that in terms of the first proviso to section 23(1) of the Income-tax Act, 1961 ('the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption of enhancement of tax. Further, he referred to the judgment of the Madras High Court in CIT v. L. Kuppuswamy Chettiar [1981] 132 ITR 416 and contended that municipal tax was not automatic so as to require the property owner to pay the tax voluntarily and, therefore, liability to pay tax would arise only on actual levy and the deduction under proviso to section 23(1) was justified only in the year in which the levy was made. It is also contended by him that in view of amendment of the first proviso to section 23 by the Taxation Laws (Amendment) Act, 1984, with effect from 1-4-1985, the assessee would get a chance to claim deduction of the taxes in the year in which they would be actually paid. 5. In order to resolve the issue, it is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has no case that the building was substantially altered or improved or reconstructed. Thus, the assessee though contemplated enhancement of municipal tax on account of increase in rent but in the Calcutta Municipal Act, there is no such provision for enhancement of tax on that account. On the other hand, the annual value of building for purpose of levy of tax once determined normally remains in force for a period of six years inasmuch as that according to section 184 of the Calcutta Municipal Act, every valuation made under section 172 shall, subject to the objections, be final. Thus, finality has been attached to the determination of annual value of a building. What the assessee has done is that he has computed the probable tax likely to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the tax voluntarily and without any levy, followed by a notice of demand from the departmental authorities'. Analysis of the Madras City Municipal Act, 1919 by the Hon'ble High Court in the following words is aptly applicable to the instant case : ". . . Broadly stated, the scheme is to continue the same rate of property tax until it is altered as a result of a quinquennial revision for which purpose the relevant procedure prescribed by the rules have to be gone into. There are also provisions for an assessee to contest the revision of the property tax by way of appeal, etc. As section 104 contemplates a levy, it is clear that the liability to tax arises at the time of the actual levy . . . ." 6. In view of above discussion, it is obvi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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