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TMI Blog1988 (6) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... e property and derives income by way of rent and service charges from the tenants. In the assessment for the assessment year 1971-72, the assessee claimed deduction of a sum of Rs. 46,867 on account of interest on debentures in the computation of its income from house property. This deduction was claimed under section 24(1)(iv) of the Act. The Income-tax Officer disallowed the claim on the ground that the charge created under the trust deed dated June 24, 1936, was a capital charge and was created thereunder voluntarily. In the appeal before the Appellate Assistant Commissioner, the assessee challenged, among others, the aforesaid disallowance of deduction of Rs. 46,867 in the computation of the income from house property. The Appellate Assistant Commissioner held that the finding of the Income-tax Officer that the charge was created voluntarily and was a capital charge remained unrebutted. He, accordingly, confirmed the disallowance of the deduction of Rs. 46,867 claimed by the assessee in the computation of the income from house property. The aforesaid disallowance was challenged in further appeal before the Tribunal. The Tribunal, on a consideration of the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay interest is concerned is accepted, the benefit of section 24(1)(iv) is not available if the charge is created by the assessee voluntarily. Merely because the charge related to a secured debt, does not make it an involuntary charge. A secured debt means a debt secured by a charge over some property. Admittedly, the debentures in the present case are secured loans. The question is how the security or charge was created in this case, was it created voluntarily, i.e., by the assessee's own volition or involuntarily, say under a court decree or by operation of any statute. The onus is on the assessee to prove that the charge was created involuntarily. The assessee has failed to discharge that onus. Even the trust deed which allegedly created the charge was not produced. In that view of the matter, the assessee is not entitled to deduction under section 24(1)(iv). For the reasons aforesaid, the first question is answered in the affirmative and in favour of the Revenue. The facts relating to the second question are that the assessee claimed deduction of Rs. 1,20,909 in the determination of the annual value of the property on account of municipal tax. It was the case of the assessee th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first quarter of 1969-70, it did not follow that there was no fresh levy of tax at an enhanced rate for the year under consideration. On a consideration of the provisions of Part IV of Chapter XI of the Calcutta Municipal Act, 1951, the Tribunal held that the notice dated May 28, 1969, given to the assessee by the municipal corporation was the notice by which the revision of annual value was effected and it amounted to a fresh levy, though "subject to objections". But the Tribunal did not accept the assessee's contention that whatever is the tax payable as per the enhanced annual value specified in the municipal corporation's notice dated May 28, 1969, must be taken as the tax levied in respect of the property for the purpose of determining the deduction under the proviso to section 23(1). According to the Tribunal, although the assessee claimed deduction in full as per the notice dated May 28, 1969, the authorities under the Income-tax Act have to allow deduction under the proviso to section 23(1) only with reference to the municipal tax levied. The Tribunal held as follows: "The tax due as per the revised annual value shown in the notice dated May 28, 1969, cannot be considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he total liability for municipal taxes which the assessee could claim by way of deduction under the proviso to section 23(1) of the Act in respect of the buildings during the accounting year was Rs. 1,78,784 and that the said amount was to be allowed as a deduction irrespective of the fact that the assessee had raised a dispute about the extent of the liability before the Corporation and that the assessee had not paid the whole of it to the Corporation of Calcutta. Aggrieved by the above decision of the Tribunal, the Department got the following question referred to the High Court under section 256(1) of the Act : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the full taxes levied by the Corporation of Rs. 1,78,784 should be deducted under section 23(1) of the Income-tax Act, 1961 ?" The High Court answered the above question in the affirmative and in favour of the assessee. The matter was then taken before the Supreme Court. The Supreme Court held as follows (p. 711) : "The only point canvassed before the High Court and before us is whether the expression borne by the owner would refer to the amount of tax which the owner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Supreme Court made it clear that even where the assessee has disputed the correctness of the levy before the municipal or local authority, the assessee is entitled to deduction of the amount enhanced. In our view, the Tribunal fell in error in holding that the tax due as per the revised annual value shown in the notice dated May 28, 1969, cannot be considered as tax levied. As indicated earlier, the tax levied by the Calcutta Municipal Corporation in respect of the property was Rs. 1,55,938 up to the first quarter of 1969-70. The assessee was to bear 50% of the said tax. By notice dated May 28, 1969, the Calcutta Municipal Corporation enhanced the valuation with effect from the first quarter of 1969-70 and as a result, the tax payable in respect of the house property was enhanced to Rs. 2,41,818. As the assessee agreed to bear half of whatever tax was levied, it claimed deduction of Rs. 1,20,909 being half of the enhanced tax of Rs. 2,41,818 in the computation of its income from house property. The Income-tax Officer allowed deduction of Rs. 77,969, being half of Rs. 1,55,938, which was the amount of tax payable prior to the enhancement. The liability, as finally determined ..... 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