1943 (8) TMI 6 - HC - Income Tax

Summary

Issues:
Interpretation of Section 9 of the Income-tax Act regarding deduction for urban immovable property tax paid in Bombay.

Analysis:
The case involved the question of whether an assessee, owning property in Bombay, could deduct the urban immovable property tax paid in Bombay when calculating income assessable under Section 9 of the Income-tax Act. The assessee contended that the tax paid should be deductible under either Section 9(1)(iv) or Section 9(1)(v) of the Act.

Under Section 9(1) of the Income-tax Act, an assessee is liable to pay tax on the annual value of property owned, subject to certain deductions. Section 9(1)(iv) allows for a deduction of annual charges not being capital charges, while Section 9(1)(v) permits deductions for sums paid on account of land revenue. The assessee argued that the urban immovable property tax should qualify for deduction under one of these clauses.

The Bombay Finance Act, 1932, as amended, imposed urban immovable property tax on properties in Bombay. Section 24-B of the Act created a charge on the property for non-payment of the tax. The assessee contended that this charge entitled him to a deduction under Section 9(1)(iv). However, the court rejected this argument, stating that municipal taxes, including the urban immovable property tax, are not deductible under Section 9.

The second contention was based on Section 9(1)(v), which allows deductions for sums paid on account of land revenue. The term "land revenue" was not defined in the Income-tax Act. The court referred to a Privy Council judgment to explain that land revenue represents a sovereign right over land produce. The court noted that the urban immovable property tax in Bombay was not considered as land revenue by the legislature, as evidenced by Section 24-B.

The assessee argued that the tax should be considered land revenue, especially for lands held in freehold in Bombay. However, the court rejected this argument, stating that the tax did not qualify as land revenue under the Income-tax Act, whether for lands inside or outside Bombay. The court concluded that the urban immovable property tax in Bombay was akin to municipal taxes and did not qualify for deduction under Section 9(1)(v) as it was distinct from land revenue.

Therefore, the court held that the assessee was not entitled to any deduction for the urban immovable property tax paid in Bombay under the Income-tax Act.