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TMI Blog1984 (9) TMI 87X X X X Extracts X X X X X X X X Extracts X X X X ..... perties, which were in occupation of tenants. The State Government levied State education cess under the provisions of the Maharashtra Education and Employment Guarantee (Cess) Act, 1962 ('the Cess Act'). Section 3 of the Cess Act provided for levy and collection in the manner indicated in the Act, education cess for the purpose of providing for the cost of promoting education in the State of Maharashtra. Section 4 of the Cess Act laid down the rates at which the cess was to be collected. Section 8 of the Cess Act laid down that if the actual occupier of the building was the owner, the said cess would be leviable primarily on him. If the building had been let out, the cess would be leviable upon the lessor. Section 12 of the Cess Act provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poration Act. This cess is recovered by the Bombay municipal corporation on behalf of the State Government. This is imposed on the tenants who are actually in the occupation of the property. However, it is made recoverable from the owners of the property. In fact, the assessee pays State education cess on behalf of its tenants and recovers from its tenants. The payment of education cess does not affect the annual letting value of the property and, as such, it should be deducted from the gross annual letting value of the property. If that is not done, the result would be that this amount would go to the annual letting value of the property, and the assessee's deductions under section 24 would also increase, accordingly. In fact, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of deduction of education cess under section 24(1)(vii). The contention on behalf of the assessee, on the other hand, is that for determination of the annual value, the amount of education cess paid by the tenants should be treated as part of the rent paid by them and that the annual value should be determined on the basis of gross rent inclusive of education cess and, thereafter, deduction in respect of education cess should be made under section 24(1)(vii). 6. We have considered the rival submissions. As already stated, the ITO has observed in the assessment order that the education cess had been imposed under the provisions of the Bombay Municipal Corporation Act, 1888. This observation is not correct. In fact, the education cess has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al value of the property under section 23(1) is required to be determined on the basis of the rent received by the owner, it follows from what has been stated above that the amount of education cess should be treated as part of the rent for determining the said annual value. Under section 24(1)(vii), deduction is to be made in respect of the property. The State education cess is the tax levied on the assessee by the State Government under the Cess Act. Consequently, the assessee would be entitled to deduction of that amount from the annual value determined under section 23(1). 8. The ITO has also referred to a decision of the Tribunal for the assessment year 1967-68 in the case of another assessee in the case of Laxmi Property Ltd. [IT Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the appeal filed by the Bombay Municipal Corporation against the said decision of the Bombay High Court, i.e., the decision of the Supreme Court in the case of Bombay Municipal Corpn. v. LIC of India AIR 1970 SC 1584. The Supreme Court has held that the education cess payable by the tenant under the provisions of the Bombay Municipal Corporation Act, should be added to the contractual or standard rent, in order to compute the rateable value of the building under the provisions of the Bombay Municipal Corporation Act. Thus, this decision of the Supreme Court is an authority of the proposition that the education cess paid by the tenant to the landlord partakes the characteristics of the rent and, as such, the same should be taken int ..... X X X X Extracts X X X X X X X X Extracts X X X X
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