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Computation of income from property under Section 9 of the Income-tax Act. Detailed Analysis: The judgment pertains to a reference under Section 66(1) of the Income-tax Act concerning the computation of "income from property" under Section 9 of the taxation statute. The case involved the calculation of the assessee company's income from property for the relevant year, which was derived from gross rents realized minus certain payments made by the company. The questions raised initially revolved around the deductibility of municipal taxes and urban immovable property taxes in computing the annual value of the property. The primary issue addressed was whether municipal taxes should be deducted in determining the annual value of the property under Section 9 of the Income-tax Act. The court interpreted the concept of "annual value" as the sum for which the property might reasonably be expected to let from year to year, taking into account various factors such as market conditions, repairs, and liabilities like municipal taxes. The court held that the landlord's obligation to pay municipal taxes must be considered when fixing the rent, thus disallowing the deduction of these taxes in computing the annual value. The subsequent issue examined whether municipal taxes could be deducted as an allowance under Section 9(1)(iv) of the Act. The court analyzed the nature of annual charges and capital charges, particularly focusing on the provisions of Section 212 of the Municipal Act, which imposed property taxes as a first charge on the property itself. Referring to precedent and dissenting judgments, the court rejected the argument that municipal taxes could be considered annual charges not being capital charges, emphasizing the charge's direct imposition on the property. Additionally, the judgment addressed the potential deduction of municipal taxes under Section 9(1)(v) related to sums paid on account of land revenue. While this point was not extensively argued by the counsel, the court did not find merit in considering municipal taxes as falling under this provision. Ultimately, the court answered all questions in the negative, concluding that the assessee was not entitled to deduct municipal taxes or urban immovable property taxes in computing the income from property. The court upheld the decision of the Tribunal and directed the assessee to bear the costs of the Commissioner. In separate judgments, Justice Chagla and Justice Coyajee concurred with the reasoning and conclusions put forth by Chief Justice Stone, emphasizing the distinction between actual income received and the bona fide annual value of the property for income tax purposes. Justice Chagla highlighted that deductions must align with the allowances specified in Section 9 of the Act, while Justice Coyajee supported the decision to disallow the deduction of municipal taxes based on the prevailing legal interpretations and precedents. Overall, the judgment provides a comprehensive analysis of the legal provisions governing the computation of income from property and clarifies the treatment of municipal taxes and urban immovable property taxes in determining the annual value of the property for income tax assessment purposes.
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