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TMI Blog2012 (11) TMI 889X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. (2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in holding that for the determination of annual value in accordance with the provisions of Section 23 of the said Act or question appearing therein to encompass surcharge of municipal Tax in respect of property let out to a tenant using for commercial or non-residential purpose. (3) Whether the said learned Tribunal was justified in law in holding that the surcharge of municipal taxes on the consolidated rate as referred to in Kolkata Municipal Corporation Act, 1980 ( hereinafter in short KMC Act) collected and recovered by the assessee as the owner of the premises from the tenants or the occupiers is part of the actual rent received by the assessee within the meaning of Sub-clause (b) of subsection (1) of Section 23 of the said Act. Squarely the surcharge on the Municipal Taxes amounting to Rs. 26,59,954 is to be calculated for the purpose of determination of income in the head 'income from house property'. The short fact leading to preferring this appeal is recorded for avoiding unnecessary details in the manner as follows:- The asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order the Special Bench of the learned Tribunal held that the surcharge as referred to in KMC Act and collected by the assessee as the owner of the premises from the tenants/ occupiers, is part of actual rent received by the assessee within the meaning of sub-clause (b) of subsection (1) of Section 23 of the said Act consequently it has to be included for the purpose of determination of income under heading income from house property. Assailing above decision the learned Senior Counsel for the appellant contends that commercial surcharge under Section 171(4) of the KMC Act is imposed because of use of commercial and non-residential purpose of the property by the tenant. The character of the Commercial surcharge has been examined by the Hon'ble Supreme Court in the case of Calcutta Gujarati Education Society v. Calcutta Municipal Corporation reported in (2003) 10 SCC 533 and it is held that though the landlord is primarily liable for the surcharge but it is paid by him on behalf of the tenant. Thus it is not borne by the landlord. Sometimes it may be agreed between the landlord and tenant that the rent is inclusive of all taxes in which case the surcharge when paid by the landlord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... & Co. Ltd. (1983) 142 ITR 598 (Cal.) and CIT v. Dalhousie Properties Ltd. (1984) 149 ITR 708 (SC) respectively. He contends object of the proviso of Section 23 is that where the tenant of the property had undertaken to bear any part of the taxes levied by local authority the owner cannot be allowed to claim deduction in respect thereof . In that case annual value was to be determined by deducting the tax levied by the local authority for paying which the owner had assumed the responsibilities. Therefore, he contends that the said amount of surcharge collected by its client cannot be said to be part of the rental income in any sense. Therefore, this portion must be excluded from the income for the purpose of computation of tax. Mr. Shome learned Advocate appearing on behalf of the Revenue and Mr. H. R. Dutt learned Advocate appearing on behalf of Municipal Authority in the aforesaid two appeals advance common argument. However, Mr. Shome argued in detail and his argument was adopted by Mr. Dutt. He contends that consolidated tax payable by the owner under KMC Act includes surcharge on consolidated rate payable in respect of the premises used for commercial or nonresidential purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with, and [subject to the provisions (including provisions for the levy of additional income-tax) of, this Act] in respect of the total income of the previous year of every person...... 5.(1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which - (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year; or (c) accrues or arises to him outside India during such year....." It will appear from Section 5 of the said act that whether the income is really appropriated for its own purpose or not is not the germane of the matter and it would be clear from Section 5(1)(a) of the said Act. Once the income is received the same is exigible to tax. Ultimately if it is found the same is not enjoyed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding which is the property of the Corporation and the possession of which has been delivered under any agreement or licensing arrangement, shall be leviable upon the transferee or licence, as the case may be. (3) The liability of the several owners of any land or building constituting a single unit of assessment, which is 0or purports to be severally owned in parts of flats or rooms, for payment of property tax or any installment thereof payable during the period of such ownership shall be joint and several Provided that the Municipal Commissioner may apportion the amount of property tax on such land or building among the co-owners. (4) Notwithstanding the resting of any land in the State under the Calcutta Thika Tenancy (Acquisition and Regulation) Act, 1981, in the case of any land comprised in a thika tenancy, the property tax assessed in respect of such land and any hut or building made thereon shall be primarily leviable upon the thika tenant. Thus in this case the assessee being the lessor and/or landlord and/or owner is under obligation to pay the consolidated rates of taxes on the land and buildings. The aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lected as it is to be paid to the Corporation authorities but then it is receipt of total income within the meaning of Section 5 of the said Act. The provision of the said Act nowhere make distinction as far as concept of income is concerned from enjoyment and appropriation point of view. The moment the amount collected in relation to any transaction whatever may be the nomenclature that receipt has to be termed income. Here the commercial surcharge is receivable or received in connection with the legal relationship of landlord and tenant. This principle has been well settled long time back as has been correctly pointed out by Mr. Shome appearing with Mr. Dutt in the case of Chowringhee Sales Bureau Pvt. Ltd v. Commissioner of Income Tax, West Bengal reported in 1973 (87) ITR 542. Here the dealer in furniture sells as auctioneer effected such sale acting as an auctioneer while doing so the dealer/auctioneer realized in addition to the commission, a sum of Rs. 32,986/- received as sales tax. This amount was credited separately in its Accounts Book under the head 'Sales Tax collection account' the appellant did not pay back the amount of sales tax to the actual owner of the goods, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the word 'tax' is really part of the entire consideration and the distinction between the two amounts tax and the price loses all significance." Lawrence.J. in that case in His Lordship's own words expressed as follows: "Wherever a sale attracts purchase tax, that presumably affects the price which the seller who is liable to pay the tax demands, but it does not cease to be the price which the buyer has to pay even if the price is expressed as x plus purchase tax." Then again in another English decision in Love v. Norman Wright (Builers), Ltd. reported in (1944) 1 All E.R. page 618 Lord Justice Goddard expressed as follows: "......Where an article is taxed, whether by purchase tax, customs duty or excise duty, the tax becomes part of the price which ordinarily the buyer will have to pay. The price of an ounce of tobacco is what it is because of the rate of tax, but on a sale there is only one consideration though made up of cost plus profit plus tax, so, if a seller offers goods for sale, it is for him to quote a price which includes the tax if he desires to pass it on to the buyer, if the buyer agrees to the price it is not for him to co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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