- (1.) Both the appeals involved common question of fact and law and as such were heard analogously. These appeals are directed against the judgment and order of the Special Bench (E) Kolkata of the learned Income Tax Appellate Tribunal (hereinafter in short as the learned Tribunal) dated 18th December 2003 in relation to assessment years 1997 98 in connection with TTA 38/2001. Both the appeals were admitted by an order of this Court dated 28th April 2004 and as corrected by order dated 21st May 2004 on the following substantial question of law. (1) Whether the learned Tribunal ought not to have held the surcharge of the Municipal Tax was part of the question and/or annual value for the purpose of Section 23(1) of the Income Tax Act 1961 (hereinafter referred to as the said Act) prior to its amendment by the Finance Act 2001 with effect from 1st April 2002. (2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in law in holding that for the determination of annual value in accordance with the provisions of Section 23 of the said Act or question appearing therein to encompass surcharge of municipal Tax in respect of property let out to a tenant using for commercial or non-residential purpose. (3) Whether the said learned Tribunal was justified in law in holding that the surcharge of municipal taxes on the consolidated rate as referred to in Kolkata Municipal Corporation Act, 1980 ( hereinafter in short KMC Act) collected and recovered by the assessee as the owner of the premises from the tenants or the occupiers is part of the actual rent received by the assessee within the meaning of Sub-clause (b) of subsection (1) of Section 23 of the said Act. Squarely the surcharge on the Municipal Taxes amounting to Rs. 26,59,954 is to be calculated for the purpose of determination of income in the head 'income from house property'. The short fact leading to preferring this appeal is recorded for avoiding unnecessary details in the manner as follows:-
(2.) The assessee-company was having 1/3rd ownership at 18 Rabindra Sarani, Kolkata 700 001 prior to the assessment year 1997-98, and remaining 2/3rd portion was being owned by M/s. Poddar Udyag Ltd. Subsequently under scheme of arrangement sanctioned by this Hon'ble Court in Company jurisdiction, the assessee acquired approximately 50 per cent of the ownership of the said building from the assessment year 1997-98 onwards. Since the land and building were standing in the name of the Poddar Udyag Ltd. all formalities relating to municipal assessment were made in the name of Poddar Udyag Ltd and this company used to collect rent from tenants. The assessee disclosed rental income from the said property under the head 'income from House property' from the records. The assessee collected municipal tax amounting to Rs. 27,31.070 as well as surcharge amounting to Rs. 26,59,959. The assessee included the amounts of municipal tax collected from the tenants as income from house property by way of gross rent receipt but excluded the amount of surcharge imposed by municipal authority amounting to Rs. 26, 59,954 in the gross amount for the purpose of determining annual value of the property on the basis of the actual rent received within the meaning of Section 23 of the said Act.
(3.) The assessing officer overruling the contention of the assessee included the amount of commercial surcharge as part of the rent for the purpose of assessment of income under the head income from house property. Being aggrieved by the said decision the assessee preferred appeal before the Commissioner of Income Tax (Appeals) who decided the aforesaid contention in favour of the assessee following decision of the learned Tribunal in the assessee's own case for the assessment year 1986-87 wherein it was held that surcharge of municipal tax collected by the assessee cannot be considered to be the income of assessee. The Revenue, however did not accept this judgment in this assessment year and preferred appeal questioning correctness of earlier decision of the Tribunal relating to the assessment year 1986-87. The Division Bench of the Tribunal viewed this issue required reconsideration by larger Bench of the Tribunal. Therefore, the learned President of the Tribunal constituted the larger Bench which has ultimately rendered decision against which present appeal has been preferred.;