G. Santhanam, Accountant Member -
(1.) THE appeal of the revenue was disposed of by the Tribunal in its order dated 10-12-1993 sustaining the disallowance of Rs. 60,174, being the amount of building tax disallowed under Section 43B of the Income-tax Act, 1961. THE assessee subsequently filed a Miscellaneous Petition No. 19 (Coch)/1994 stating that whereas the CIT (Appeals) had deleted the disallowance of building tax of Rs. 60,174 holding that such disallowance would not come within the purview of Section 43B of the IT Act, as it related to computation of property income under Sections 23 to 27 of the Act, the Tribunal had upheld the disallowance on the ground that there was no evidence for payment of building tax even though the revenue did not raise any ground of appeal against the computation of property income. With the learned departmental representative not objecting to our recalling the order dated 10-12-1993, on the issue of disallowance of Rs. 60,174, that part of the order of the Tribunal was recalled and this is how we are in seisin of the present appeal.
(2.) We have heard rival submissions at length. The assessee has filed papers containing evidence of payment of property tax on 26-3-1985 and also papers relating to the adjustment sheet giving the return of income with the department filing the profit and loss account and the details thereof. The assessee is a company in which the public are not substantially interested. The previous year ends on 31-5-1984 relating to the assessment year 1985-86. It is now agreed that the reference to building tax in the assessee's papers as well as in the records is inappropriate and proper reference is to the property tax on the building. There can be no dispute that property tax would be a valid deduction in arriving at the annual value of the property and, therefore, should fall under the head 'Income from property'. The burden of Sri John's contention is that Section 43B is relevant only for the computation of profits and gains of business or profession under the provisions of Section 28 onwards and the provisions of Section 43B, cannot be invoked against the property income falling under Sections 22 to 27. Sri P. Balakrishnan, the learned departmental representative contends that since the opening words of Section 43B starts with a non obstante Clause such as "notwithstanding anything contained in any other provision of this Act" [Emphasis supplied], the Section is applicable even in respect of income falling under Section 22 of the Act. We are unable to agree with the interpretation placed by the learned departmental representative on the provisions of Section 43B because though the Section overrides any other provision of the Income-tax Act, yet, ultimately such overriding effect is only with reference to the computation of income referred to in Section 28 of the Income-tax Act, 1961. This is evident from a reading of the Section which is as follows :
43B. Notwithstanding anything contained in any provision of this Act, a deduction otherwise allowable under this Act in respect of-
(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or
(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or
(c) any sum referred to in Clause (ii) of Sub-section (1) of Section 36, or
(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution or a State financial corporation or a State industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing,
shall be allowed irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him :
Provided that nothing contained in this Section shall apply in relation to any sum referred to in Clause (a) or Clause (c) or Clause (d) which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under Sub-section (1) of Section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return :
Provided further that no deduction shall, in respect of any sum referred to in Clause (b), be allowed unless such sum has actually been paid in cash or by issue of a cheque or draft or by any other mode on or before the due date as defined in the Explanation below Clause (va) of Sub-section (1) of Section 36 and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the due date.
Explanation (1) - For the removal of doubts, it is hereby declared that whereas deduction in respect of any sum referred to in Clause (a) or Clause (b) of this Section is allowed in computing the income referred to in Section 28 of the previous year (being a previous year relevant to the assessment year commencing on the first day of April, 1983, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this Section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him.
Any lurking doubt in this regard gets cleared if one has a look at the Explanation where reference is made to the computation of income mentioned in Section 28. Therefore, Section 43B is operative only in computing the income from business or profession. Its effect cannot be extended to the computation of income under the head 'Property' falling under Section 22 of the IT Act. The Assessing Officer has proceeded to determine the income from business on the basis of the net profit as disclosed in the profit and loss account, in a sum of Rs. 5,02,623. In adjustment No. 5, he had disallowed a sum of Rs. 60,174 under the caption 'building tax'. We have already mentioned that this description is not correct and the impugned amount refers to property tax only. The account filed by the assessee shows that it has in all debited a sum of Rs. 79,220 in its profit and loss account as 'property tax'. This consisted of a provision of property tax on building to the extent of Rs. 60,174, which is one of the items noticed in adjustment No. 5 in the assessment order. In addition, the Assessing Officer has disallowed the property tax of Rs. 79,220. It is agreed that the latter disallowance of Rs. 79,220 is in order because the Assessing Officer has to determine the income from property separately, in the computation of which the deduction of Rs. 79,220 will have to be considered and as this amount was debited to the profit and loss account as an expenditure, it called for an adjustment of the nature as found in SI. No. 8 of the adjustments in the assessment order. Now the disallowance of Rs. 60,174 made separately against SI. No. 5 of the adjustments in the assessment order is an additional disallowance because this sum is already included in the amount of Rs. 79,220. Therefore, the learned CIT (Appeals) was justified in deleting the disallowance of Rs. 60,174. That part of the order of the Tribunal dated 10-12-1993 holding otherwise stands modified by this order.
Normally this should be the end of the tunnel. But it is not so in view of the additional ground filed by the revenue at the time of the appeal after recall. The additional ground is as follows :
Without prejudice to the grounds already taken it is urged that the CIT (Appeals) erred in deleting the disallowance made Under Section 43B without appreciating the fact that the said sum of Rs. 60,174 has already been deducted while computing the income under the head 'Property'. In any case, the CIT (Appeals), while deleting the disallowance made by the ITO under Section 43B, ought to have restricted the Municipal tax to Rs. 19,046 instead of Rs. 79,220 deducted while computing the income under the head 'Property', as the assessee had paid property tax (municipal tax) only to the extent of Rs. 19,046 during the year out of the total claim of Rs. 79,220.
(3.) WE have heard rival submissions. Sri John vehemently contends that the additional ground does not arise out of the order of the CIT (Appeals); nor does it arise on the subject-matter of appeal before the Tribunal. In the appeal filed by the assessee before the first appellate authority, against the order of assessment, the assessee had two grievances, viz., (0 the non-granting of investment allowance and (ii) the disallowance made under Section 43B in respect of a sum of Rs. 1,94,663, which included the amount of Rs. 60,174 in respect of property tax erroneously described as building tax. Both objections related to the computation of income from business. The learned CIT (Appeals) allowed the appeal of the assessee. Thus, the subject-matter of appeal before the CIT (Appeals) was not the property income. The revenue came on appeal objecting to the order of the learned CIT (Appeals) in granting investment allowance and deleting the disallowance made under Section 43B. Thus, the subject-matter of appeal before the Tribunal was also confined to the computation of business income falling under Section 28.
Therefore, the department should not be permitted to file an additional ground against the computation of property income as done by the Assessing Officer by allowing deduction of the unpaid property tax of Rs. 60,174. Sri John relied on the following decisions :
CIT v. Begum Noor Banu Alladin and Indian Steel & Wire Products Ltd. v. CIT  208 ITR 740 (Cal.).
Sri Balakrishnan submitted that the assessee had misled the Assessing Officer in believing that the entire property tax was paid in the relevant accounting year; while factually, the payment was made subsequent to the previous year which ended on 31-5-1984. In this connection, he took us through the details furnished by the assessee, wherein, instead of mentioning the previous year as 31-5-1984, the assessee had mentioned the previous year as 31-5-1985. It is because of this error in the year as found in the statement that the Assessing Officer believed that the assessee had paid the property tax in full and gave deduction of Rs. 79,220 in computing the property income. Had the previous year been correctly mentioned, the Assessing Officer could not have and would not have allowed the deduction for property tax in an extent of Rs, 79,220, but would have allowed deduction only to the extent of Rs. 19,046. Though his action in disallowing the sum of Rs. 60,174 cannot be sustained, as that amount was already included in the sum of Rs. 79,220, which was also disallowed by the Assessing Officer, in computing the business income, there was no justification for the Assessing Officer to allow the deduction of the provision of Rs. 60,174 in computing the income from property. Thus, the assessment order suffers from a grievous error and as the Tribunal is empowered to determine the tax liability of an individual, no matter whether the assessee is in appeal or whether the department is in appeal, it is the assessment that is in appeal before the Tribunal and, therefore, the Tribunal is competent to correct the error in the assessment order, especially when it is brought to its notice. Sri Balakrishnan relied on the following decisions :
Jute Corporation of India Ltd. v. CIT  187 ITR 688 (SC), CIT v. Kerala State Co-operative Marketing Federation Ltd.  193 ITR 624 (Ker.) and CIT v. Smt. Khairunnissa EbraAim  201 ITR 903 (Ker.).;