1990 (6) TMI 28 - HC - Income Tax

Summary

Issues:
Challenge to legality of property tax demand by Corporation of the City of Bangalore from lessee. Interpretation of section 112 of the Karnataka Municipal Corporations Act, 1976 regarding primary liability to pay property tax.

Analysis:

The appellant challenged the legality of property tax demand by the Corporation of the City of Bangalore, claiming that as a lessee, the primary liability to pay tax should be on the lessor as per section 112 of the Karnataka Municipal Corporations Act, 1976. The appellant had sub-leased properties and disputed the assessment of tax based on annual rental value. The administrator upheld the assessment, leading to the appellant filing two writ petitions.

The court examined the lease agreement, which allowed the lessee to make alterations and additions to the property. The lease was extended, and the lessee sub-leased the premises to three individuals. The court referred to section 112 of the Act, which outlines the primary liability to pay property tax based on the nature of occupancy and lease agreements.

The court distinguished the present case from a Supreme Court judgment cited by the appellant, emphasizing that the case fell under sub-section (2) of section 112 of the Act. This section specifies that if a tenant builds on leased land, the tenant is primarily liable for property tax, regardless of sub-leasing arrangements. The court held that the lessee, who constructed buildings on the leased land, was primarily liable for property tax under this provision.

The appellant argued for reimbursement under sub-section (6) of section 112 if held liable for property tax due to receiving lower rent than sub-lessees. The court declined to address this issue in the current proceedings, stating it could be pursued separately.

Ultimately, the court dismissed the appeals without expressing an opinion on the appellant's right to reimbursement under sub-section (6) of section 112. The judgment clarified the primary liability of the lessee for property tax under the Act based on the construction of buildings on leased land, upholding the legality of the tax demand by the Corporation of the City of Bangalore.