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Issues: Conflict between two decisions of Appellate Tribunal regarding deduction of taxes levied by local authorities in computing annual property value u/s 23(1) of IT Act, 1961.
In the judgment, the Appellate Tribunal considered two cases that led to the reference due to conflicting decisions. In the first case, the assessee claimed deduction of estimated Municipal taxes for a newly constructed building even though the assessment had not been made within the previous year. The Tribunal allowed the deduction as the actual figures were available by the time of assessment. It was noted that the annual value, being notional net income, allowed for the deduction of Municipal taxes levied. In the second case, the Municipal tax had been enhanced for previous years, and the assessee claimed deduction for the amount demanded. The Tribunal allowed the claim, including the sum related to an earlier period, based on the provision allowing deduction for "tax levied" under section 23(1). The main contention raised by the Revenue was that only the Municipal tax leviable for the previous year should be deducted under section 23(1) as it pertains to the income attributable to the previous year alone. On the other hand, the assessee argued that the expression "tax levied" should include the tax demanded from the assessee, not necessarily limited to the previous year. The Tribunal noted that the annual value no longer being a notional income due to an amendment, the expression "tax levied" should refer to the actual tax demanded, irrespective of the year it relates to. After considering the rival submissions, the Tribunal concluded that there was no conflict between the two decisions. It was held that "taxes levied" in section 23(1) should mean the actual tax demanded, regardless of the year it pertains to. The Tribunal emphasized that the annual value, now based on actual rent received, allows for the deduction of actual taxes levied in the previous year, even if they relate to earlier periods. The Tribunal clarified that the taxes levied by a local authority should be deducted while determining the annual value, irrespective of any sum attributable to a period beyond the previous year. In the specific cases before the Tribunal, it was observed that the deduction of taxes levied by the local authority in computing the annual property value was justified. In one case, the deduction was allowed for the entire amount demanded by the local authority, overturning the lower authorities' decisions. In another case, the Tribunal confirmed the CIT's decision to allow the deduction of the balance amount claimed by the assessee. Ultimately, the Tribunal dismissed one appeal and allowed another, based on the principles discussed regarding the deduction of taxes levied by local authorities in determining the annual property value under section 23(1) of the IT Act, 1961.
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