JUDGEMENT
K.S.Viswanathan, -
(1.)THE only issue raised by the assesses in this appeal is whether the municipal taxes paid could be deducted while computing the income from self-acquired property.
(2.)The assessee is an individual. In respect of a property used by him as his residence, he had disclosed an net annual value of Rs. 1,482. The Income-tax Officer was of opinion that considering the built-up area of the house the income disclosed was low. He estimated the annual letting value at Rs. 10,000. Since the assessee had an income of Rs. 31,714 under all other sources put together before the deduction available under Chapter VI-A, he restricted the income of the self-occupied property at Rs. 3,171 being 10% of this income. From this figure, he allowed a deduction for repairs and arrived at an income of Rs. 2,643.
The assessee's contention was that in arriving at the income from self-occupied properties, the municipal tax payable in respect of that property should also have been deducted. The claim for deduction was Rs. 1,718. Before the Appellate Asstt. Commissioner, the assessee pressed this claim basing himself on the decision of the Gujarat High Court in the case of CIT v. Arvind Narottam Lalbhai Dalpatbhai Vada [1976] 105 ITR 378. The Appellate Asstt. Commissioner, however, found that this issue has been considered by the Bombay High Court in the case of CIT v. I. Chatterji [1986] 161 ITR 535/24 Taxman 251. In this decision, the Bombay High Court had considered the decision of the Gujarat High Court also. The Bombay High Court came to a finding that in computing the income from self-occupied property, there is no provision for deduction of municipal taxes. The Appellate Asstt. Commissioner preferred the decision of the Bombay High Court on this point. He also rejected the alternate submission of the assessee that the tax could be deducted under Section 24(1)(vii).
(3.)THE assessee is on further appeal before me. THE submissions made before the Appellate Asstt. Commissioner were repeated. I have considered the submissions of both the sides. THE Gujarat High Court in the decision reported has held that under Section 23(2), while computing the annual value of the self-occupied property, the municipal tax paid can be deducted. A similar decision has also been given by the Madras High Court in the case of Addl. CIT v. M.B. Rajeswari [1977] 110 ITR 443. Both these decisions have been considered by the Bombay High Court in I. Chatterji's case (supra). THEy had preferred to dissent from the view of the two High Courts mainly on the ground that it was a settled position in view of the judgment of a Full Bench of Bombay High Court in the case of New Piece Goods Bazar Co. Ltd. v. CIT [1947] 15 ITR 319 that in arriving at the annual value of property local or municipal taxes cannot be deducted. This Full Bench decision therefore is the basis of the Bombay High Court decision. As a matter of fact, the Bombay High Court Full Bench decision in New Piece Goods Bazar Co. Ltd. 's case (supra) has been reversed by the Supreme Court and the Supreme Court's decision in New Piece Goods Bazar Co. Ltd. v. CIT [1950] 18 ITR 516. THE Supreme Court has held that in computing the income from property under Section 9 of the Indian Income-tax Act, 1922 an assessee is entitled to deduct under Section 9(1)(iv) the municipal tax paid. In view of this, it would be safer to follow the ratio laid down by the other two High Courts and hold that in computing the annual letting value of a self-occupied property, the municipal tax payable would be deductible.
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