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TMI Blog1968 (1) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1922, is allowable under the Indian Income-tax Act, 1922?" The assessee is an individual and carries on wholesale business in cloth under the name and style, Messrs. Chunilal Rameswar Lal at Deoghar. For the purpose of determination of taxable income the assessee claimed deduction of a sum of Rs. 125 on account of the payment made by him to Deoghar Municipality as professional tax under section 150A of the Act for the assessment year of 1961-62. Both the Income-tax Officer and the Appellate Assistant Commissioner of Income-tax disallowed the deduction. However, the Income-tax Appellate Tribunal accepted the contention of the assessee that the tax paid to the Municipality was not a personal tax levied on the profits or gains of any bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyment within the municipality and whose taxable income does not exceed fifteen hundred rupees per annum or the value of whose place of business does not exceed ten rupees per mensem or whose income from employment does not exceed twenty-four hundred rupees per annum. The proviso contemplates three kinds of exceptions depending on--- (i) the taxable income, (ii) the valuation of the business premises, and (iii) the income from employment. The relevant provisions made in the Fourth Schedule of the Municipal Act may be quoted here : " 1. Every licence shall be granted under one or the other of the classes mentioned in the second column of the following table and there shall be paid half-yearly from 1st April to 30th September and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c) Commission agent, broker (not included in Serial No. 2), architect, engineer, contractor, medical practitioner (whether registered or not), owners of pathological laboratories and clinics, dentist, barrister, legal practitioner, ferry farmer and person holding employment--- (a) in respect of whose income, income-tax is assessed- (i) having half-yearly income of not less than Rs. 15,000 ... 125.00 " The aforesaid provisions clearly envisage three kinds of payment on account of professional tax on a graduated scale depending on--- (a) the amount of paid-up capital applied in the profession, (b) the value of the business premises, and (c) the total yearly income. The assessee falls within the second category, that is, unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of any place of business is required to take out a licence, the licence shall be taken out by the occupier if the business is carried on by the occupier, but otherwise by the owner. The payment of the tax may be regarded as part of the expenditure of the person which is essential for carrying on the business within the municipal limit as any other expenditure. Serial (a) of clause 1 makes provision for the payment of the tax on trade, profession, etc., carried on by a joint stock company depending on the amount of capital applied in the trade, profession, etc. The amount of capital is the measuring rod for payment of tax. Serial (c) of clause 1 provides for payment of tax by commission agent, broker (not included in Serial No. 2), archite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains ;. . ." Sub-section (4) of section 10 of the Indian Income-tax Act, 1922, clearly says that if any sum is paid on account of any cess, rate or tax levied on the profits or gains of any business, profession or vocation or assessed at a proportion of or otherwise on the basis of any such profits or gains, it is not to be deducted. The impugned tax paid to the Municipality, as has been found above, was not paid on profits or gains or on the basis of any such profits or gains of the business but was paid for carrying on the business by the assessee in the particular premises the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion than the word " in " or " on ". Hence, a class of municipal tax, though not a tax on the premises or buildings, may nevertheless be a tax in respect of the premises or buildings used for the business. Hence, the payment of the impugned amount of Rs. 125 as professional tax under section 150A read with section 82(l)(ff) of the Municipal Act is in substance a municipal tax in respect of the business premises, and is covered by clause (ix) of sub-section (2) of section 10 of the Income-tax Act. The assessee is entitled to get allowance for the same under section 10(1) of the Indian Income-tax Act, 1922. The Appellate Tribunal was right in giving allowance to the assessee for a sum of Rs. 125 paid by him under the Bihar and Orissa Municipal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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