The tax paid to the union board for occupying the business premises is an allowable deduction in computing the profits of the business under section 10 of the income tax Act.

JUDGMENT

1. Order OF REFERENCE BY THE income tax APPELLATE TRIBUNAL.

2. The Commissioner of income tax, Bengal, by his petition dated 11th February 1942, has asked us to refer to the High Court the following question of law as arising out of the Order of the Appellate Tribunal in appeal R. A. A. No. 10 of Bengal of 1941-42.

Whether the rate imposed under the provisions of the Bengal Village Self-Government Act, 1919, on a person occupying a building within the union and using the same for the purpose of business is an allowable deduction in computing the profits of the business u/s 10, income tax Act.

3. The respondent was required by the rules of the Tribunal to file his reply to the application. He has filed his reply and he objects to the reference on the ground that the question of law formulated does not arise. In the arguments addressed to us at the time of hearing, the counsel appearing for the respondent tried only to justify our Order on the ground that the Order is legally right. The counsel failed to show why the question formulated is not a question of law. The question formulated is so obviously legal that we did not consider it necessary to hear the applicant under Rule 52 of the Tribunal Rules and a notice was issued to the respondent to file his objection, if any. By an Order dated 9th December 1941, this Bench of the income tax Appellate Tribunal decided that the sum of Rs. 84 claimed as an expense by the assessee was an allowable deduction in computing the profits. The necessary facts in connexion with this allowance may be mentioned:

4. Statement of the case. -- The respondent carries on business at Nalhati where there is levied a union board tax. The income tax Officer merely disallowed the claim of RS. 84 claimed by the respondent paid for the union board tax without recording any reason. The Appellate Assistant Commissioner, however, dealt with this matter in his Order dated 12th February 1941 and he mentioned that the claim made is not to be allowed as this is a tax on profits. He considered that the tax has been rightly disallowed by the income tax Officer. This Bench of the income tax Appellate Tribunal took the view that the tax paid to the union board for occupying the business premises is an allowable deduction. The reason stated by the Tribunal was that the tax paid to the union board is for occupying the business premises and for doing business in the premises within the jurisdiction of the union. The payment was considered to be for the purpose of the business. Section 37, Bengal Village Self-Government Act of 1919, Local Self-Government Department (Government of Bengal Union Board Manual, vol. I) deals with the imposition of the union rate and authorises the union board to impose yearly on persons who are owners or occupiers or owners and occupiers of buildings, within the union a rate stated therein. It reads as under:

The union board shall impose yearly on persona who are owners or occupiers or owners and occupiers of buildings, within the union, a rate amounting to-

(a) the sum required, after deduction of the contribution, if any, made by the Local Government in this behalf, for the salaries and equipment of the dafadars and chaukidars and the salaries of the establishment of the union board, and (b) the sum estimated to be required to meet the expenses of the board in carrying out any of the other purposes of this Act, if such estimate has been approved by more than half the total number of the members of the board at a meeting specially convened for the purpose,

together, with ten per cent, above such sums to meet the expenses of collections and the losses due to nonrealisation of the rate from defaulters.

Section 38 then deals with the nature of assessment. It mentions:

the rate to be imposed by a union board u/s 37 shall be an assessment according to the circumstances within the union and property within the union, if any, of the persons liable to the same.

5. u/s 101 of the same Act, the Local G