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TMI Blog1923 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... he outturn of the coal in the one case and upon the despatches of the coal and coke in the other should be deducted from the taxable income under the provisions of the Indian Income-tax Act, 1922. The question for determination is whether in arriving at the taxable income the local rates to which I shall refer in greater detail presently can be deducted under the provisions of section 10 (2) clauses (viii) or (ix) of the Income-tax Act, 1922. It is admitted that the income payable by the assessee comes under the head of business within the meaning of section 10 and the tax payable in such a case is in respect of the profits or gains of the business carried 6n by the assessee. The section provides by clause (2) that such profits or gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of owners of mines, on the annual output from their mines. In pursuance of that section a rate was imposed upon the assessee in this case upon the annual output from the mine. The other tax or rate is that imposed by the Bihar and Orissa Jharia Water-Supply Act (Bihar and Orissa Act III of 1914) which by section 45 provides that: There shall be formed a fund to be called the Jharia Water Fund which shall be vested in the Water Board and there shall be placed to the credit thereof in the District Treasury or a Sub-Treasury ; (1) the proceeds of a tonnage cess on the annual depatches of coal and coke from mines. Section 54 and the following sections in Chapter VI make provision for the levy of the cesses there named. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... warehouses, etc., as distinguished from private residences unconnected with the business. The levy in such cases where the rate is imposed on the premises for municipal purposes is generally assessed on the annual value of the premises and I do not think it can be said that the word premises includes the annual output or the annual despatches' of coal from the mines. With regard to the second point, namely, whether these rates are included under sub-clause (ix) of clause 2 of the section the case appears to me to present very much greater difficulty. It must be borne in mind that in assessing a taxable income derived under the head of business it is only the profits or gains of the business that are to be taxed and the question whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income-tax. In that case the Bench of which I was a member came to the conclusion, although it was not absolutely necessary for the purpose of that decision, that road cess could not be deducted in arriving at the profits of a business taxable as income. But the reason why that view was taken was that before any cess became leviable at all the profits in the case of a business must first be ascertained and that it was upon those profits when they were ascertained that the cess was to be levied and it was upon the same profits that the income-tax was also to be levied. Therefore one could not, in arriving at the taxable amount either for income-tax or for cess, deduct in the one case cess or in the other case income-tax. The present case h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profit earned can be ascertained. It does not seem to me that in arriving at the profits the expenses incurred in earning those profits should necessarily be what may be called voluntary expenses. If in fact the very nature of the business requires that certain expenses should be incur-red before the profits can be ascertained then I think that such expenses can fairly be said to come within the meaning of sub-clause (ix) of clause 2 of section 10 of the Act as expenditure incurred solely for the purpose of earning such profits or gains. In my opinion therefore, the local rates which the assessee claims should be deducted from his taxable income, before the assessment of his income is made. No specific question is formulated for our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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