1982 (8) TMI 40 - HC - Income Tax

Summary

Issues:
1. Interpretation of whether the amount realized from tenants as occupiers' share of property tax forms part of the property's annual value for income tax assessment.
2. Determination of whether the excess collection of occupiers' share of property tax not paid to the Municipality is liable to be assessed as income in the hands of the assessee.

Analysis:

Issue 1:
The Tribunal referred two questions to the High Court regarding the nature of the amount collected from tenants as occupiers' share of property tax. The Tribunal held that this amount did not constitute part of the property's annual value for income tax purposes. The Tribunal rejected the argument that this amount should be considered as rent or service charges, emphasizing that it was separate and distinct from these categories. The lease deed presented in the case supported this distinction, showing that the occupiers' share of tax was a separate liability from rent and service charges. The Tribunal concluded that this amount did not fall under the definition of income under the Income-tax Act, 1961, as it was not part of the sum for which the property might reasonably be expected to let from year to year. Therefore, the High Court agreed with the Tribunal's decision on this issue, ruling in favor of the assessee.

Issue 2:
Regarding the excess collection of occupiers' share of property tax that was not remitted to the Municipality, the Tribunal determined that it was not liable to be assessed as income in the hands of the assessee. The Tribunal viewed the assessee's position as that of an agent or trustee, indicating that any amount not paid to the Municipality might need to be refunded to the tenants. However, the Tribunal reiterated that this amount did not have the character of income for the assessee, even if it was not refunded to the tenants. Therefore, the Tribunal directed the exclusion of this sum from the assessee's total receipts. The High Court concurred with the Tribunal's decision on this issue, holding that the excess collection of occupiers' share of property tax was not of revenue character and should not be treated as income. Consequently, the High Court answered the questions in favor of the assessee on both issues.

In conclusion, the High Court upheld the Tribunal's decision, ruling that the amount collected from tenants as occupiers' share of property tax did not form part of the property's annual value for income tax assessment and that the excess collection not paid to the Municipality was not liable to be assessed as income in the hands of the assessee.