Tax Management India. Com
Law and Practice  :  Digital eBook
Research is most exciting & rewarding
  TMI - Tax Management India. Com
Follow us:
  Facebook   Twitter   Linkedin   Telegram

TMI Blog

Home

1975 (10) TMI 13

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... es taken together as both rank pari passu, as held by the Supreme Court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that the ratio of the decision of the Supreme Court in Shekhawati General Traders Ltd. v. Income-tax Officer applied to the facts of this case ? (3) Whether, on the facts and in the circumstances of the case, the loss computed by the Appellate Assistant Commissioner of Income-tax and confirmed by the Tribunal on the sale of bonus shares held by the assessee in the company was erroneous in law ?" The Commissioner of Income-tax has applied by the income-tax application, which we are now disposing of, that the three questions which were not referred by the Tribunal on the ground that they were questions of fact and application of law in the light of the facts of the particular case, particularly the law as explained by the Supreme Court in Commissioner of Income-tax v. Dalmia Investment Co. Ltd. and Shekhawati General Traders Ltd. v. Income-tax Officer, to direct the Income-tax Appellate Tribunal to draw up a statement of the case and to raise a .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... y 1, 1954, was held to be Rs. 4,15,400. The Appellate Assistant Commissioner held that remaining 80 shares out of the 700 shares which were sold during the relevant year were bonus shares received by the assessee after January 1, 1954. He ascertained that originally the assessee had acquired 248 shares at the cost of Rs. 24,800 and between the date of the original issue and January 1, 1954, 372 bonus shares were issued with the result that the 248 shares originally held by him had become 620 shares (248 plus 372). Therefore, the Appellate Assistant Commissioner took the cost of 80 bonus shares at Rs. 10 per share, that is, Rs. 24,800 original cost of acquisition, spread over the total of 2,480 shares held on the first day of the previous year and he added the cost of these 80 bonus shares, that is, Rs. 800 to the market value of 620 shares as on January 1, 1954. Thus, he calculated the total value of 700 shares (620 plus 80) at Rs. 4,16,200 and deducting the sale proceeds of Rs 3,14,300 from this figure, he ascertained the capital loss at Rs. 1,01,900. The matter was carried in appeal before the Tribunal and the Tribunal, following the decision of the Supreme Court in Shekhawati Ge .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... shares were to rank pari passu, the only way the cost of 80 bonus shares could have been ascertained was in the manner in which the Appellate Assistant Commissioner made his calculations. Under these circumstances it seems to us that the Tribunal was right in declining to refer the three questions arising out of the sale of the 700 shares and the valuation of the 80 bonus shares. We, therefore, decline to issue any directions to the Tribunal regarding the three questions which were not referred and in respect of which Income-tax Application No. 46 of 1975 has been made to this court. Rule issued. The income-tax application of July 7, 1975, is, therefore, discharged with no order as to costs. Coming to the question which is actually referred to us, the facts are that the assessee occupies his own property for the purpose of his residence and the question before the Income-tax Officer, the Appellate Assistant Commissioner and the Tribunal was whether the assessee could claim deduction on account of municipal taxes from the annual letting value of the property on which the income-tax is to be charged. The Tribunal following its own earlier decision in Income-tax Officer, Group C .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... nothing contained in that proviso shall apply in computing the annual value of that residential unit." Under section 24, sub-section (1), income chargeable under the head "Income from house property" shall, subject to the provisions of sub-section (2), be computed after making the following deductions, namely:-- "(i) in respect of repairs,-- (a) where the property is in the occupation of the owner, or where the property is let to a tenant and the owner has undertaken to bear the cost of repairs, a sum equal to one-sixth of the annual value." In order to appreciate the rival contentions, a brief history of the provisions relating to what is known in the language of taxation law as "self-occupied property" should be set out here. Under the Indian Income-tax Act, 1922 (hereinafter referred to as "the 1922 Act"), in the Act as originally enacted, there was no provision whatsoever till 1939 regarding deduction of municipal taxes and even after the 1939 amendments there was no provision for deduction of municipal taxes. By the amendments which came into effect from assessment year 1950-51, it was provided that if a tenant was liable to pay the taxes but the owner paid the .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... High Court in Liquidator, Mahmudabad Properties Ltd. v. Commissioner of Income-tax. The Calcutta High Court has observed at Page 477 of the report: "We shall dispose of the question of municipal taxes as deductions at this stage. The relevant provision which governs this question of municipal tax deduction is the proviso to section 23 of the Income-tax Act, 1961, whose crucial expression is 'provided that where the property is in the occupation of a tenant'. It is only then, when such property is in the occupation of a tenant, that the municipal taxes can qualify for deduction in determining the annual value of the property. The basic fact is wanting in the present reference. This property, 3, Gun Foundry Road, was not in the occupation of a tenant within the meaning of those words in the proviso to section 23 of the Income-tax Act, 1961. We have already discussed the finding on record that the property was not let at the relevant time. That finding binds us. Besides, the facts show, as we have indicated, that the property was requisitioned by the Government and was derequisitioned before the assessment in question and in any event in the case of such a requisition, under the We .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ction, in the case of a property the construction of which was completed before the 1st day of April, 1950, total amount of such taxes and in the case of any other property, one-half of the total amount of such taxes shall be deemed to be the tenant's liability. By virtue of this fiction created by the Explanation, the whole of the total amount of the taxes paid to the local authority in respect of the property in the occupation of the tenant was to be deducted because that was deemed to be the tenant's liability and it is, therefore, clear that in the light of the proviso read with the Explanation, since the particular property was constructed before the 1st day of April, 1950, if the property had been occupied by a tenant, the whole amount of municipal taxes were to be deducted from the annual letting value for the purpose of arriving at the annual value of the property. The words which require interpretation in section 23(2) are two phrases: the first phrase being "the annual value shall first be determined as in sub-section (1)" and the second phrase is "and further be reduced by one-half of the amount ..........." Therefore, the question that we have to ask ourselves is as to .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... (1) will only apply, namely, that the annual value should be considered to be the same for which the property could reasonably be let from year to year. However, we must also take notice of the words "and further be reduced". The words "further be reduced" indicate that some reduction from the annual letting value has already been carried out before further reduction contemplated by sub-section (2) of section 23 can be considered and that further reduction can only be of the municipal taxes as contemplated by the proviso to sub-section (1) read with the Explanation to that proviso. There is no other meaning that can possibly be attached to the words "further be reduced". If these words had not been there in sub-section (2), we would have had no hesitation in accepting the contention urged on, behalf of the revenue by Mr. Kaji. However, sub-section (2) of section 23 must be read as a whole and in the light of the words "further be reduced". It must be held that some reduction, namely, the deduction of the municipal taxes, half or full, as the case might be, has to be first carried out and, thereafter, the reduction contemplated by sub-section (2), namely, one-half of the amount .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

Quick Updates:Latest Updates