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TMI Blog1986 (8) TMI 107X X X X Extracts X X X X X X X X Extracts X X X X ..... r year the Tribunal had held that the service charges could be estimated at one-fourth of the gross rentals received by the assessee and that such service charges were not liable to be taxed under the head 'Income from house property', but under the head 'Profits and gains of business or profession'. This fact is borne out by the Annexures A and D to the assessment order passed by the ITO wherein he has taken away one-fourth of the gross rentals from the head 'Income from house property' to the head 'Profits and gains of business or profession'. 3. The only ground pressed in this appeal is that the assessee's claim for deducting the interest of Rs. 58,179 which the assessee was called upon to pay by the Calcutta Municipal Corporation as i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the head 'Income from house property' in accordance with the provisions of sections 22 to 24 of the Act. 4. Shri C.R. Sen urged before us that the revenue authorities erred in their decision. He referred to the decision in the case of Mahalakshmi Sugar Mills Co. v. CIT [1980] 123 ITR 429 (SC) for the proposition that interest payable on arrears of cess constituted an accretion to the cess. Extending that analogy to the facts of the present case, Shri C.R. Sen urged that interest paid on arrear of municipal tax also became an accretion to the municipal tax and became a part of it. Consequently, he urged that the same was admissible as deduction under section 23(1). Next, he urged that it has been held in the case of CIT v. Dalhousie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law. The Hon'ble Supreme Court considered the matter and observed that the relevant Act provided penalty for non-payment of cess separately and so the interest charged for non-payment of cess represented merely compensation for withholding the amounts due to the Government and that it did not represent any penalty for infringement of any law. In the instant case, we are not concerned with the computation of business income or the question as to whether the interest was or was not paid for infringement of any law. Hence, we are unable to apply the ratio of the said reported case to the facts of the instant case. Besides, we find that the Tribunal had occasion to consider this matter in its order dated 23-6-1986 in IT Appeal Nos. 1608 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross rentals as assessable under the head 'Profits and gains of business or profession' (vide Annexures A and D of the assessment order). This has been done by the ITO in accordance with the decision of the Tribunal in an earlier year. As one-fourth of the gross rentals has been apportioned towards business income, it is reasonable to hold that one-fourth of the expense in the form of interest under consideration should also be apportioned towards the said business. The interest relates to unpaid municipal tax relatable to the same buildings from which the service charges were earned. Hence, we direct that a sum of Rs. 10,545 be allowed as a deduction while computing the business income from service charges as computed in Annexure D to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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