Back
1984 Supreme(SC) 232
E.S. VENKATARAMIAH AND V. BALAKRISHNA ERADI, JJ.
Petn. for Spl. Leave to Appeal (Civil) No. 3786 of 1982, D/-23-8-1984.
Commissioner of Income-tax, Calcutta, Petitioner
Versus
Dalhousie Properties Ltd., Respondents.
A.Subhashini, K.C.DUA
Headnote:
Constitution Of India, 1950 - Article 136 - Income-tax Act, 1961 - Section 23(1), 23, 22 - House Property - Tax - Respondent, was an assessee - It owned extensive properties and its income from rents realised was substantial - In assessment year in question, assessee claimed a deduction of Rs. 1,78,784 which represented tax levied by Corporation of Calcutta as a deductible item while computing its income from house property - It appears that assessee had questioned extent of liability which had just then been enhanced before Corporation and on that account had not actually paid whole of it - This led to a difference of opinion between department and assessee – Whether expression borne by owner would refer, to amount of tax which owner was liable to pay or amount of tax which he had actually paid in discharge of said liability - Held, It is true that expression borne may refer to either liability which a person is liable to discharge or actual sum paid by him in discharge of that liability - But Court agree with High Court that in present ,context it should be construed as referring to former namely, amount of tax which owner is liable to discharge as stated in proviso to Section 23 (1) of Act and not latter one - Expression "annual value" is a notional figure and it does not refer to any actual receipt - It is arrived at by deducting taxes levied by a local authority for paying which owner has assumed responsibility from sum for which property might reasonably be expected to let from year to year - It is reasonable to treat annual value of a house property as remaining more or less constant during entire period covered by any given previous year except perhaps where tax liability itself is modified by local authority concerned - It cannot keep on changing as and when some payment towards tax liability imposed by local authority is made by assessee during year - In order to ensure that there is no unwarranted fluctuation in annual value during year in question such actual payment should be eliminated from consideration but only tax liability imposed by local authority which assessee is liable to pay as contemplated by proviso to Section 23 (1) of Act should be allowed to be deducted under said proviso - It is not, therefore, necessary that assessee should have actually paid amount of tax in question before such deduction is claimed - Position is not also different even where assessee has disputed correctness of levy before local authorities concerned - A mere expectation of success in proceedings in which assessee has disputed such levy does not disentitle him to statutory deduction on basis of levy which is in force – Petition Dismissed.
Judgement
VENKATARAMIAH, J. :- This Special Leave Petition is filed under Article 136 of the Constitution by the Commissioner of Income-tax, West Bengal, Calcutta against the decision of the High Court of Calcutta in Income-tax Reference No. 573 of 1971 : (Reported in 1979 Tax LR 1138).
2. The respondent, Dalhousie Properties Limited was an assessee under the Income-tax Act, 1961 (hereinafter referred to as the Act) in the assessment year 1966-67, the relevant previous year being the year ending March 31, 1966. It owned extensive properties and its income from rents realised was substantial. In the assessment year in question, the assessee claimed a deduction of Rs. 1,78,784 which represented the tax levied by the Corporation of Calcutta as a deductible item while computing its income from house property. It appears that the assessee had questioned the extent of liability which had just then been enhanced before the Corporation and on that account had not actually paid the whole of it. This led to a difference of opinion between the department and the assessee.
3. In course of time the dispute regarding the assessment of the liability of the assessee under the Act reached the Income-tax Appellate Tribunal. The Tribunal held that the total liability for municipal taxes which the assessee could claim by way of deduction under the proviso to Section 23 (1) of the Act in respect of the buildings during the accounting year was Rs. 1,78,784 and that the said amount was to be allowed as a deduction irrespective of the fact that the assessee had raised a dispute about the extent of the liability before the Corporation and that the assessee had not paid the whole of it to the Corporation of Calcutta. Aggrieved by the above decision of the Tribunal, the Department got the following question referred to the High Court under Section 256 (1) of the Act :-
"Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the full taxes levied by the Corporation of Rs. 1,78,784 should be deducted under Section 23 (1) of the Income-tax Act, 1961?"
4. The High Court answered the above question in the affirmative and in favour of the assessee. This petition is filed against the said decision of the High Court.
5. The material part of Section 23, as it stood in the assessment year 1966-1967 read as follows :
"23. Annual value how determined. - (1) For the purposes of Section 22 the annual value of any property shall be deemed to be the sum for which the property might reasonably be expected to let from year to year :
Provided that where the property is in the occupation of a tenant and the taxes levied by any local authority in respect of the property are under the law authorising such levy payable wholly by the owner, or partly by the owner and partly by the tenant, a deduction shall be made equal to the part if any of the tenants liability borne by the owner ....."
6. Under Section 22 of the Act what is chargeable to income-tax under the head Income from house property is the annual value of property consisting of any buildings or lands appurtenant thereto of which the assessee is the owner other than such portions of such property as he may occupy for the purpose of any business or profession carried on by him the profits of which are chargeable to income-tax. As explained by this Court in Bhagwan Dass Jain v. Union of India, (1981) 2 SCR 808: (1981 Tax LR 664) income-tax is payable under this provision in respect of the bona fide annual value of the property determined as provided in Section 23 of the Act. Section 23 (1) laid down the principle according to which the annual value of any property could be notionally determined during the relevant period. First, the sum for which the property in question might reasonably be expected to let from year to year had to be ascertained. From that as per the proviso to Section 23 (1) of the Act where the property was in the occupation of a tenant, if taxes levied by a local aut
